ASX's October low back on radar

Barely three months into the year and there have already been 22 trading days in which the Dow traded in a 400-point or greater range versus just one day in 2017, wrote Tematica Research chief macro strategist Lenore Hawkins. "The average number of sessions in a year with swings that great is all of 2 and the only time in history where we've seen such heightened volatility was between October 2008 and January 2009."

Key to a continuing bullish outlook has been expectations that first-quarter US corporate earnings will surge, and that a raft of dividend increases and stock buybacks will be announced.

The first round of blue-chip results are set for Thursday and Friday with JPMorgan, BlackRock, Wells Fargo and Citigroup among the big banks reporting. Analysts expect S&P 500 profits to rise 18.4 per cent in the first quarter, according to Thomson Reuters I/B/E/S. Any profit misses or uninspiring statements on capital returns to shareholders could stoke sharp sell-offs.

Fiscal shot in the arm

Ms Hawkins said the 45 or so earnings announcements scheduled for this week and next will set the stage for expectations for the more than 200 earnings reports that hit during the week of April 16, with hundreds more announcements to be had in the following weeks. "It's going to get fast and furious," she said.

While the March US jobs report missed expectations at the headline level with 103,000 new jobs vs estimates of 185,000, the strength of the US economy is intact. Wages edged higher too, bolstering the Federal Reserve's gradual rate hike path.

BlackRock global chief investment strategist Richard Turnill said in a new blog post late last week that the US economy is getting a fiscal shot in the arm – from tax cuts and federal government spending – just as it nears full capacity. "Faster growth could hasten the expansion's expiration date and shorten the cycle if fiscal stimulus does not come with increased productivity," he said.

Mr Turnill, though, is optimistic. "The tax overhaul, however, gives businesses an incentive to further boost investment after years of caution. Greater capex and pent-up productivity gains from technology investment could lift potential growth over time, helping to contain any overheating."

And a capex upswing could boost emerging markets, helping to counter any modestly slower growth in China, he said, adding that BlackRock sees further robust growth in Europe. "Overall, we see synchronised global growth providing a solid foundation for equities."

Locally, there will be some new data on the Australian economy this week with the NAB March business survey on Tuesday, Westpac-MI consumer sentiment on Wednesday and housing finance on Thursday. RBA governor Philip Lowe will speak in Perth on Wednesday, ahead of the central bank's Financial Stability Review on Friday.

As for the Washington-Beijing trade row, it may be too early to assess the potential impact for Australian companies.

Citigroup last week argued that European companies could secure better access to markets in both the US and China, though there are two key risks: Mr Trump could yet turn his ire towards Europe, not to mention the threat to global growth if the world's two biggest economies dig in for a drawn out trade war.

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